August 21, 2014

THERE WAS NO BUBBLE, JUST FRAUD:

The settlement "addresses allegations that Bank of America, Merrill Lynch, and Countrywide each engaged in pervasive schemes to defraud financial institutions and other investors in structured financial products known as residential mortgage-backed securities, or RMBS," U.S. Attorney General Eric Holder said.

The securities typically included a high percentage of subprime mortgages and the sellers misrepresented to investors the degree of risk involved, Justice alleges. When the housing market collapsed, many of the RMBS became worthless.

Holder said the subprime mortgages bundled into the securities "contained material underwriting defects; they were secured by properties with inflated appraisals; they failed to comply with federal, state, and local laws; and they were insufficiently collateralized."

Even so, he said, "these financial institutions knowingly, routinely, falsely, and fraudulently marked and sold these loans as sound and reliable investments. Worse still, on multiple occasions -- when confronted with concerns about their reckless practices -- bankers at these institutions continued to mislead investors about their own standards and to securitize loans with fundamental credit, compliance, and legal defects."